BlackRock’s iShares announced that the launch of the iShares € Govt Bond Climate UCITS ETF, the first climate risk-adjusted government bond ETF in the market. The new ETF aims to track the FTSE Advanced Climate Risk-Adjusted European Monetary Union (EMU) Government Bond Index (EGBI). The ETF, which began trading on Deutsche Börse’s ETF venue, Xetra, on October 5, aims to provide a higher exposure to countries less exposed to climate change risks and a lower exposure to countries that are more exposed to climate change risks.
Brett Olson, Head of iShares fixed income, EMEA, at BlackRock, said:
“Sovereign issuers are facing increasing pressure to meet sustainability criteria, as more investors consider the ESG profile of their fixed income portfolios. Until today, investors have had very limited options for cost effective exposure to government bonds that incorporate climate risk. This launch is yet another example of our commitment to providing investors with more choice to build sustainable portfolios.”
FTSE Russell’s Advanced Climate EGBI builds on the index provider’s Climate EGBI, launched in January 2020, adding the application of scores to country issuers across the three core climate risk pillars of physical risk, transition risk and resiliency in equal measure. According to FTSE Russell, physical risk represents the level of climate related risk exposure to the country and its economy from the physical effects of climate change. Transition risk represents the level of climate related risk exposure of the country’s economy as measured by the distance to reach the modelled emissions needed to meet a 2-degree alignment. Resilience represents a country’s preparedness and actions to cope with its level of climate related risk exposure.
FTSE Russell stated that the index is designed for index users with an increased focus on climate performance of their government bond portfolios, and is the result of close collaboration with Blackrock’s team over recent months.
Arne Staal, Global Head of Research and Product Management, FTSE Russell, said:
“The decision by a leading investor and ETF provider such as Blackrock to license FTSE Russell’s Advanced Climate EGBI for an ETF listing marks an important juncture in climate themed investing in European fixed income markets. Both institutional and private asset owners are increasingly including climate objectives in their decision making and are adjusting fixed income portfolios based on climate concerns. We expect growing interest from investors in this area.”